Hong Kong-based KGR Capital has launched the KGR Capital China Absolute Return Fund, a multi-manager, multi-strategy fund of hedge funds that will invest in the markets of greater China and will initially have a portfolio of around 10 hedge funds.

The KGR Capital China Absolute Return Fund is targeting returns of around 20 per cent a year over the cycle, and is expecting volatility to be in the region of 10 per cent. The Cayman-domiciled fund is targeting professional and institutional investors and offers US dollar, euro and sterling asset classes. It has monthly subscriptions and redemptions, and the minimum investment is USD100,000.

'We believe that the current conditions are becoming favourable to hedge fund investing in China,' says Mark White, chief executive of KGR Capital (Europe). 'The Chinese authorities have shown recently that they are willing to accelerate the pace of capital market reform to address some of the distortions in the system, which have caused the sharp rise in domestic equity prices over the last 18 months.

'These measures will provide significant opportunities for the rapidly-developing Chinese hedge fund universe, which now amounts to nearly 100 funds. KGR Capital has been adding resources to its Hong Kong based research team to enable it to identify, select and monitor a selection of the best Chinese hedge funds. Early indications are that our selected managers have been able to maintain positive returns this month despite the recent sharp sell-off in the A share market.'

Hong Kong-based KGR Capital was formed in 2002 by John Knox, Nick George and Christopher Rampton, who worked together for many years in Asia at Jardine Fleming and JPMorgan. The firm launched its first specialist Asian fund of funds, the KGR Capital Asia Pacific Absolute Return Fund, in August 2003. Since then it has delivered initial investors an annualised return of 10 per cent with volatility of 4.5 per cent. KGR Capital employs 15 professionals at offices in Hong Kong and London.